Top 5 Debt Collection Myths

Top 5 Debt Collection Myths

According to recent research conducted by accounting software Xero, over 62% (out of the 500 small businesses asked) encountered late or unpaid invoices in the past year. Disabling a fair amount of cash flow results in a knock on effect whereby late payments received resulted in the affected business’ own delayed payments to suppliers.

And the sad truth is, almost 25% of Australian businesses admitted to not being able to survive a month in the event all of their unpaid invoices remain unpaid.

That said, the debt collection process plays a prominent role for businesses of all sizes. There are, however, certain myths attached to the debt recovery process which should be debunked given their influence to hold back business owners from taking debt recovery action.

Here are 5 debt collection myths you need to be aware of.

1. Chase a debt and you’ll lose your customer

This myth certainly holds no truth. Having a debt collection agency handle the debt recovery process for your business only means that you are able to focus on your business growth and operations while leaving the debt collection process to the professionals.

Engaging a reliable debt recovery agency sends a clear message to all your customers and clients that you mean business when it comes to your cash flow. A reputable debt recovery agency is one that works ethically, efficiently, effectively, transparently and in conjunction with the principles of your business.

2. The debt recovery process is just for big companies

More small businesses engage debt collectors as a result of not having the internal resources to chase outstanding invoices as vigorously as bigger companies. By engaging the external services of a debt collection agency, small businesses have more time to focus on the operations of the business as opposed to chasing debt.

Debt recovery agencies typically work on a commission basis, which is a no win no fee privilege for small businesses.

3. The debt just isn’t big enough to engage a debt recovery agency

Not a true statement at all, debts can be recovered from as small as $500 if done correctly through an online debt recovery platform such as DebtForce.

If you look at it this way, if a debt is big enough to impede on your business cash flow, it’s definitely big enough to involve a debt collection agency to chase it up for you.

4. Debt collectors are just too expensive

Emphasising on the point that most debt collection agencies work on a commission basis, the sentiment that debt collectors are too expensive does not stand true.

The real cost of not recovering the debt will be the full price of the outstanding invoice, compared with just a percentage of that going out to a debt recovery agency. If you look at it from an investment perspective, it is a practical solution to an imminent problem affecting resources and business cash flow.

5. Going down this route will give my business a bad reputation

The preconceived notion that debt collection companies carry out bad practices does not stand true with reputable agencies. Debt recovery companies are governed by the Fair Debt Collection Practices Act which details the best practices of teaching out to debtors along with restrictions on how often.

Trusted debt collection services also follow strict codes of ethics with good and professional mannerism when dealing with your customers and clients. Engaging them also means that the businesses you deal with will take you seriously when it comes to paying on time, reducing the stress of raising overdue invoices.

Increase your efficiency and cost-effectiveness with modern debt collection technology using an online platform like DebtForce. With no upfront fees followed by real time tracking of your debt recovery process, you will always be kept in the loop about the status of your outstanding invoices.

Learn more about how DebtForce can help you recover your business debts today.